Reverse Mortgages The opportunity for brokers post major bank exits - - PowerPoint PPT Presentation

Reverse Mortgages

The opportunity for brokers post major bank exits

13 March 2019

Agenda

• Heartland overview
• Growing demand
• Market insights
• Heartland Reverse Mortgage
• Criteria
• Fulfilment process and client safeguards
• Typical customer and case study
• Broker Proposition
• Summary

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Heartland Overview

• Established in 2004 as Australian Seniors Finance
• Over 8,500 customers and ~$700m in financial

receivables

• Nearly $1b in home equity released
• Assisted over 17,000 seniors
• FY19 24.9% annualised growth in first half
• Purchased by Heartland, a NZ based financial services

group, on 1 April 2014

• Parent company, Heartland Group Holdings, is listed
• n NZX and ASX
• Supporting Dementia Australia
• Banking and Finance Oath - 100% committed

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Reverse mortgages are a core product for Heartland, making up over 29% of finance receivables.

Growing demand

• Number and proportion of older Australians is growing
• 20,000 Australians turn 65 every month1
• The number of Australians over 65 is projected to grow from 15

percent of the population in 2018 to 23 percent by 20502

• Despite home ownership rates falling, the 65+ category remains

consistent at ∼85%3

• Compulsory superannuation (paid by employers) only came into

effect in 1992, improving coverage for employees from 51 percent in 1988 to 80% post implementation4

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ABS 2017. Australian Demographic Statistics, Jun 2016 1-4 Australian Bureau of Statistics

• $3.16b market as at 30 September 2018
• Market grew $124m in the past 12 months

(excl. reclassification by major bank)

• Heartland is fastest growing and has 21% market share
• Last of the major banks (CBA / Bankwest) have exited

the market

• Westpac and Macquarie exited in mid-2017
• Biggest competition apathy, lack of awareness and

tightening of the belt

• Pension Loans Scheme creates awareness and

provides validity

• Arguably most heavily regulated consumer finance

product in Australia

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Market Insights

Poll Question 1

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• Similar to a regular mortgage, except: designed for those 60+ and

no regular repayments

• Continue to own home
• Interest added to loan monthly
• Loan is repaid when last resident vacates the property (downsize,

sale, death, aged care)

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Heartland Seniors Finance Offers:

• Standard Reverse Mortgage
• Aged Care Option
• Investment Property/Holiday Home as Security

Reverse Mortgages

1. Debt Consolidation (54%) 2. Home Improvements (52%) 3. Income and Cash Flow (27%) 4. Travel (22%) 5. Car – Purchase/Repair (21%) 6. Medical (10%)

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* As at December 2018

Loan Uses

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• Free up funds to live a better retirement
• Remove stress from everyday bills
• Continue to own home, which provides

connection to family, friends and community

• Tick off bucket list
• Remove debt servicing obligations
• Flexibility of multiple drawdown options
• Ability to repay at anytime
• Considerable protections
• Thorough process to ensure

informed decision

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Customer Benefits

Poll Question 2

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• Market leading product
• Flexible
• Available from 60 years old
• Lump sum, regular advance and reserve drawdown options
• Repay (partially or in full) at anytime
• Redraw available
• Equity protection option (10%, 20%, or 50%)
• Competitive rate

currently 6.54% p.a., comparison rate* 6.56% p.a.

• Interest rate is variable to provide maximum flexibility, which is

more important to this demographic than certainty. Especially given there are no regular repayments required.

• Settlement Fee - $495

valuation fee – included if valued <$2m, otherwise quote

• No ongoing fees

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Heartland Reverse Mortgage Loans

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• Maximum Loan-to-Value Ratio (LVR) is based on the age of the youngest borrower
• Max LVR = Age less 45 (represented as a %)
• Maximum two borrowers
• Other occupiers allowed (e.g. a carer or family member), however not protected under

loan

• Minimum property value $200k (higher in some locations)

60 65 70 75 80 85 90+ 15% 20% 25% 30% 35% 40% 45% 13

• Minimum loan size $5k
• Residential property, of conventional construction in

good condition

• Target locations are cities and regional centres with

deep property market

Criteria

Aged Care and Secondary Property Options

• Reverse Mortgage repayment trigger is customer vacating property.
• For aged care or a secondary (investment property / holiday home), the

borrower does not reside in the property.

• Aged Care:
• Fixed 5 year term
• +5% higher LVR
• Otherwise same criteria as standard reverse mortgage
• Provides breathing space

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• Secondary property:
• 25% discount on property value
• Repayment is based on last nominated borrower ceasing to

reside in primary residence (or sale of property)

• HSF have developed a socially responsible product with a thorough fulfilment process

Fulfilment Process and Client Safeguards

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• Regulated under NCCP
• Enquiry around future needs including aged care
• MoneySmart Projection provided to clients to assist

understanding

• Independent legal advice around loan contract is

mandatory

• Family discussion, Centrelink, and financial advice

encouraged and attested to

• Assessment made to ensure that loan is not

unsuitable

• Three Promises^ to every customer
• Compliance call

^provided customers meet obligations under the loan

Customer Satisfaction

• In our most recent customer survey, results showed an astounding 96% of customers

would recommend Heartland to friends and family.

• Adding to that, 94% have said they would recommend taking out a reverse mortgage to

friends and family.

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Typical Customer

• Retired couple (48%) / female (35%) / male (17%)
• 70-75 years old
• Have depleted super and other assets
• On Aged Pension
• Sydney, Melbourne, Brisbane, Coastal NSW / QLD
• Property worth $850k
• Fund 12%, balance set aside for Cash Reserve and/or Regular Advance
• Use it for renovations, travel, medical expenses, car, aged care, debt consolidation, mortgage

refinance, support next generation, everyday bills, etc.

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Case Study

• Jack 74 and Bev 70
• Home value: $800,000
• Maximum loan amount: $200,000 (based on Bev’s age –

25%)

• Initial Borrowing: $100,000 (including fees)
• Payoff a current mortgage
• Fix up their home
• Remaining available facility: $100,000
• Drawdown additional $15k 2 years after taking loan for a

holiday with grandkids

• Drawdown additional $15k 4 years after taking loan for medical

expenses

• Still has $70k for any future expenditure or unforeseen

expenses

Loan (7% int. rate) Property Value (3% growth rate) Equity Remaining 5 Years $176,341 $927,419 $751,078 10 Years $249,985 $1,075,133 $825,148 15 Years $354,385 $1,246,374 $891,898 18

“Peace of mind” “Given us the freedom to do so many things” “Financial pressures eased” “You are a lifesaver” “Maintain my independence”

Customer Stories

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Broker Proposition

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Why Offer Reverse Mortgages?

• Broaden and diversify business
• Grow revenue
• Long term sticky customers
• Expand referral base
• Get in to growing market
• Another arrow for the quiver
• Straight forward application process
• Minimal ongoing maintenance
• Opportunities within customer base
• Leverage referral network

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Poll Question 3

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23

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Commission

Product Upfront on drawn amount Upfront on undrawn amount Post settlement drawing Trailer Standard Reverse Mortgage 0.88% 0.44% 0.44% 0.22%p.a. Aged Care Option* 1.00% NIL 1.00% NIL Secondary Property 0.88% 0.44% 0.44% 0.22%p.a.

• Same interest rate for all new customers
• Same commission rate, no dependency on size or volume
• Same fees apply to all loans

*Aged Care Option structure available for all loans on request

Poll Question 4

25

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Summary Help Australian seniors live a better retirement

• Growing market and increasing

demand

• Australia’s leading provider
• Award winning and socially

responsible product

• Heavily regulated with robust and

thorough fulfilment process

• Great opportunity for brokers

Questions?

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Applications

1300 662 865 applications@seniorsfinance.com.au brokers@seniorsfinance.com.au

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Contacts

IMPORTANT NOTICE: This information has been prepared without taking account of the needs, objectives, or financial situation of any particular individual. Applicants should consider their own circumstances and, if necessary, seek professional advice. Applications are subject to loan approval criteria. Terms, conditions, fees and charges apply. Credit provided by ASF Custodians Pty Ltd. *Comparison rate is based on a loan of $150,000 over a term of 25 years. Please note the comparison rate only applies to the examples given. Different loan amounts and terms will result in different comparison rates. Costs such as redraw fees and costs savings, such as fee waivers, are not included in the comparison rate but may influence the cost of the loan. Please note the information set out in this presentation may change from time to time. Please retain for future reference. Australian Credit Licence Numbers: Australian Seniors Finance Pty Ltd - 386760 (ACN 108 875 636) / ASF Custodians Pty Ltd - 386781 (ACN 106 822 780)

New Loan Scenarios

Jeff Murray, Head of Distribution 0414 302 929, jmurray@seniorsfinance.com.au Caitlin Stuart, Business Development Manager 0430 008 752, cstuart@seniorsfinance.com.au Emma Byrne, Distribution Support Officer 03 9661 0932, ebyrne@seniorsfinance.com.au